New Delhi:
The Central government is now taking up the issue of disinvestment
of its shareholding in Maruti Udyog (MUL) very seriously
and it has started taking major steps towards it.

Last week, disinvestment ministry secretary Pradeep Baijal
categorically said the government has decided to completely
exit from MUL. Following this, the cabinet
committee on disinvestment announced that certain
changes have been made in the disinvestment model for
the company.

MUL
will now float a rights issue of Rs 400 crore by the end
of the calendar year and the Centres share in the rights
issue will go to Suzuki Motors instead of domestic FIs
as was decided earlier this year.

The government stake will come down slightly after the
rights issue. MUL has a paid-up capital base of Rs 132
crore. The rights issue would see the share capital increase
by a small amount.

The size of the rights issue has been fixed at Rs 400
crore because the company needs capital infusion of about
this amount. Once the rights issue is completed, the government
will offload its balance holding through an IPO to retail
shareholders, institutions and other investors.

The crucial issue in the rights offering is the
renunciation and control premium, which will go the government
exchequer. These elements of the rights issue will have
to be negotiated with Suzuki in accordance with the prevailing
global practice. The renunciation premium is for forgoing
the government''s portion of the rights in favour of Suzuki.
The control premium is for handing over control of Maruti
to Suzuki, as the government''s holding will fall below
the existing level of 50 per cent after the renunciation,
and make Suzuki the largest shareholder in Maruti.

The changes in the
disinvestments model are due to the fact that domestic FIs, who
till February this year were keen to pick up shares in MUL, have
turned shy prompting the government to renounce its portion in
favour of Suzuki.

While this puts to rest speculation that the
government is considering an alternate model for disinvesting its
share in Maruti, it now puts the ball in Suzukis court which
has to decide if it wants to subscribe to the government''s
portion of the rights offering.

The government is
expected to begin the process of appointing the valuers on 1
October. It has been announced that three valuers would be
appointed to complete the valuation process of the company and
decide on the premium to be fixed on the rights issue.
Since early this year the company has been stressing on increasing
profitability and has taken a number of measures to achieve it.

Last week, MUL announced its first-ever voluntary retirement
scheme, setting off speculation that this was but the first step
towards divestment of the governments shareholding in the
company. The speculations have proved right.

It now remains to be seen
whether MULs future owner is Suzuki Motor Corp or General
Motors Corp.